Photo: IKEA
Will IKEA become the world’s largest furniture rental outlet?
Furniture purchases are usually a long-term investment, provided nothing breaks. But now the world’s largest furniture retailer is planning to make buying a kitchen table or a bookcase less of a commitment by letting customers lease products rather than purchasing them outright.
In February, IKEA announced that it would begin trialing furniture rentals with the launch of its first pilot in Switzerland, according to CNBC. As the chain envisions it, customers will lease furniture for a given period of time and then either return it or replace it with something new. IKEA will then refurbish the returns and resell them.
The new plan comes as the chain seeks ways to develop new subscription services and reduce its environmental impact.
Rental services have gained popularity in some spaces in the U.S., especially apparel, over the past few years. Rent the Runway, for example, allows those on a budget to wear high-end luxury brands with a significantly reduced price tag and without having to commit to purchasing something expensive that they’ll rarely wear.
But furniture, unlike a given piece of luxury clothing, gets used frequently if not daily and yet does not experience the same degree of wear during use that clothing does. So, it’s not obvious if the same incentive is there for customers to rent furniture as there is high-end clothing.
Car leasing has long been a popular way of making a vehicle affordable, but cars tend to cost tens of thousands of dollars on average, making leasing the only practical way for many to afford one.
IKEA is on the opposite end of both the price and luxury spectrum from these rental-heavy verticals. The chain’s low prices are seen as a selling point by customers and the product tends to be seen as functional, if not disposable.
There could be some demand for the service, however, among people who frequently change up the look and feel of their homes or apartments. That could give IKEA an opportunity to experiment with longer-lasting furniture or unique designs that customers would be more likely to want short-term.
Discussion Questions
DISCUSSION QUESTIONS: How likely is IKEA’s furniture rental service to prove popular? What do you see as the pros and cons of IKEA getting into furniture rentals and how do you expect its competitors to react?
Poll
BrainTrust
Dave Bruno
Director, Retail Market Insights, Aptos
Georganne Bender
Principal, KIZER & BENDER Speaking
I view this as more of a prudent experiment than a definitive long-term shift. It may bring a handful of new shoppers into the IKEA fold, but IKEA’s prices are designed precisely to allow people to own fashionable, reasonably good quality furniture. As such, the need for renting is somewhat redundant.
Besides, if this did really take off it would damage IKEA’s business model which is about massive volumes delivered in a very simple way where the customer does puts in some of the effort to keep costs low. Renting undermines that as it adds layers of complexity and cost.
What I question is the second rental potential of IKEA furniture. I’ve always heard that taking it apart for a move is difficult and it’s never the same again.
The rental furniture space has been dominated by Rent-A-Center and others for years now. However the sharing economy, along with the very transient workforce trends may just open a window of opportunity for IKEA to start their own furniture rental services.
However, IKEA’s furniture assortments have already become synonymous with value, and for those only living in an apartment for several years or less. For a subscription rental service to truly resonate, it’s time for the IKEA team to experiment and innovate with higher quality furniture assortments compared to their usual DIY offerings. This will also enable the company not only to develop a new revenue stream but also be more aspirational, as they pursue a higher level of customer.
Welcome to the sharing economy, IKEA! I love this idea. Who doesn’t love rearranging furniture once in a while to change up the look of their living room? Now we can change the actual furniture, too. I can envision this concept being very popular, as long as it is accompanied with services that make it very easy to execute. Not many of us enjoy the infamous assembly experience that IKEA brings to every furniture purchase, and I don’t even want to think about what disassembly instructions might look like! So, assuming they bundle rentals with delivery, assembly and pickup services, I think people would be willing to give this a try. And if IKEA can manage to convince people to actually sign up for furniture rental subscriptions, I am guessing their stockholders will be very happy as well.
Agreed on the crucial need for the delivery, assembly, and pickup services for this to get any traction with consumers. I also wonder if IKEA intends to design a specific line of furniture that can be assembled/disassembled a little easier than many of their pieces for this rental positioning. I suppose a big part of that depends on how long people will be renting for – are we talking two days for a weekend soiree or two years in a heavy use situation? I’m not convinced this will stick in the U.S.
This will be interesting to watch. At IKEA’s price points, I’ve always equated their furniture to fast fashion – stuff people can use for a few years and replace. Their higher-end stuff, like kitchen cabinets, is not likely part of this program. I suppose in urban environments where younger generations are highly mobile, this could have a market. But I don’t see it as a major business model opportunity for them.
Sometimes you just want to toss an entire room and start again; IKEA will make it easy for customers to quickly change their look. I like the idea of IKEA furniture rental. As long as you don’t have to put it together.
IKEA will be a disruptor in their category.
It’s all about positioning. If it’s called furniture rental it might not work, however, if it’s positioned as upgrading your furniture periodically, as the ability to refresh your home’s look and feel, it will be successful.
The biggest pro is that it will bring new customers to the franchise, the biggest challenge will be to build the operational infrastructure to support the service.
It will be difficult for competitors to react since they are not vertically integrated to support this type of service.
This move by IKEA is analogous to the one by the auto industry after World War II to popularize leasing in lieu of outright purchase. This reduced the financial hurdle and increased unit turnover. It may take a few years, but we’ll look back and wonder what all the commotion was about back in 2019. To put a slight variation on what Dave wrote, “welcome to the circular economy.”
After college, bachelorhood, marriage/divorce and three kids in college I definitely qualify as “experienced” with IKEA furniture. It is fabulous single-use stuff. It is NOT fabulous to move/reuse. The damage loss on the returns will sink this idea. That practicality aside, it defeats the principal business model of value-priced single use furniture. Perhaps the Swedish approach to IKEA is different than that of U.S. consumers. But I don’t see this concept taking off on this side of the Pond.
Wait a minute… is IKEA really talking about leasing out furniture from its own brand? Because I’ve owned multiple IKEA pieces throughout my lifetime and these products don’t have the ability to withstand more than two years of consistent use. At least not by a family with kids or pets.
It’s wise for IKEA to try to get in on the leasing economy, but I’m not sure that this is the way to do it. The only situation where I can see this strategy actually benefiting the consumer is in short-term vacation homes or Airbnbs.
Interesting experiment! I can see it working if they develop designer packages i.e.: home office, baby furnishings, etc. but to succeed IKEA will have to address the assembly and wear-and-tear issues that come with their “value” proposition.
“…Experiment with longer-lasting furniture…” This was my thought, as IKEA is of course known more for affordability than durability, which would seem to be a requirement for this type of business. It’s also not known for delivery, which would seem to be another key part.
So while I think the demand may be there, I believe they need to make some adjustments for it to work.
Furniture is just an indicator. Borrowing is not low-rent; it’s high style, regardless of the items changing hands. It’s swapping — a term very palatable in the widely accepted sharing economy. Temporary purchasing in fact shares many characteristics of the sharing economy, which indicates more product categories will be absorbed into this model of consumerism.
I wrote a whole article about this for Forbes.
At the low price point and furniture that isn’t “built to last,” it seems like it isn’t designed for a rental model. For people that know they will only need the furniture for a fixed period of time (e.g., college furniture, housing that is for a temporary relocation, etc.) it may make sense, as it will avoid having to move or sell the furniture after it isn’t needed anymore. Maybe this is a bigger opportunity than I think. The other issue is re-renting or reselling furniture that isn’t as durable as other brands.
It will be interesting to see how this test goes.
I like the concept, but anyone that owns IKEA knows that you never disassemble and reassemble their furniture. It’s much less portable than you might think.
As a new business model this has phenomenal potential. There are so many situations where people need furniture for a limited time. What becomes interesting however is how “heavy duty” the furniture would need to be to be rented out because it could be moved between locations more frequently than typical domestic furniture.
A bigger challenge will be how to support this from a technology and business process perspective. Application software to support this simply does not exist — they will have to create composite applications in order to enable this. Integration technology will become a massive focus for them.